Beacon Communities, LLC, a Boston-based real estate company, is under contract to buy the Residences at Ninth Square from the current owners, who are mired in debt from the project’s original construction loans. The agreement was signed on June 29.

If state and local governments both approve the deal, writing off tens of millions of dollars they’re owed, Beacon would take over 335 rental units in several buildings, 50,000 square feet of commercial space and two parking garages, all along Orange Street from Center to George.

“The City of New Haven, the Connecticut Housing Finance Authority, and the Ninth Square Project Limited Partnership, the current owner, are in discussions with Beacon Communities concerning the acquisition of the Ninth Square property,” said Michael Alperin, Beacon’s acquisitions director. “As part of the plan, Beacon Communities will undertake necessary capital improvements and preserve the affordability of this important mixed-income, multi-use community in downtown New Haven.”

The properties are being sold by McCormack Baron and the Related Companies, two developers who built the Ninth Square properties in the 1990s and succeeded in transforming the area into a vibrant mixed-income neighborhood.

After years of negotiations, they were unable to refinance to satisfy the Connecticut Housing Finance Authority (CHFA) and the City of New Haven, the two major debtors, forcing them to offload the properties.

Despite watching McCormack Baron and Related fall into a debt they couldn’t escape, Beacon is still willing to take on the challenge of lining up the right financing to make structural upgrades and keep more than half the units affordable.

While Beacon said it couldn’t comment on the history of the Ninth Square’s finances, the company said it is working with government partners to make sure the financing is done right on the second go.

“In our discussions with both the city and the state, we’re ensuring that we’re appropriately underwriting the project going forward so that it can be a sustainable asset,” Alperin said. “All those discussions are still being had, but everyone is ensuring there’s a realistic understanding of how to make this sustainable going forward.”

Working out the numbers with CHFA, who offers bonds and tax credits, could be the last major sticking point before a sale is finalized. But the quasi-public state agency won’t say a word about what’s going on, declining to even confirm details about the process that happened months ago.

Lisa Kidder, a CHFA spokeswoman, directed questions to the developers. Related Companies declined to comment, saying it’s company policy not to talk about deals. McCormack Baron declined to comment too.

(Technically, a tax-credit partnership will be selling the Ninth Square properties; the developers are simply the controlling partners.)

Initially, back in 1993, the city used $4.6 million in special obligation bonds to help McCormack Baron and Related Companies fix up historic but neglected buildings and construct some new brick ones throughout the district.

Soon, the area southeast of the Green filled up with renters with a wide range of salaries, plus a lively mix of stores, restaurants, bars and galleries. The influx of people kicked off a broader rebirth of downtown into a place where people choose to live and hang out at night, even as store-owners now worry that business closures and increased crime are driving shoppers away.

For the last five years, as the developers sought a bailout, the city struggled with what to do about the Ninth Square: whether to sink more resources into the neighborhood or to let market forces alone determine the survival of affordable housing there.

Since 2013, the developers have been looking to refinance a total of $86 million they owed, while seeking forgiveness for all unpaid interest, totaling $10 million when discussions began years ago.

With so much owed, it looked unlikely anyone would get their full payment back.

That didn’t come as a surprise at City Hall. Because of the way the original tax-credit deal was structured, policymakers had to offer loans rather than grants. They expected they wouldn’t see the money again, despite what was said in public hearings.

“The missing component is not anything that the developers did wrong, other than it never had enough public financing,” said Development Administrator Matthew Nemerson. “It was probably much too optimistic in what money it could pay back to people. The sobering analysis here is that, between local, state and federal governments, we just have to be allocating more actual money to affordable housing.”

This time around, before the properties even went on the market, the Harp administration set out exactly what it believed the city could offer, making concessions like a lowered tax bill and and loan forgiveness in exchange for keeping rents at a price low-income families could afford.

Those conditions have already been vetted by the Board of Alders leadership, who will have to convince the rest of the body to approve the transfer of ownership.

“We got our negotiations up front,” Nemerson said. “We didn’t want to have to do it after Related Companies and CHFA already picked a winner.”

Most importantly, 55 percent of the units must remain affordable for the next two decades, Nemerson said. “One of the wild cards here was whether a new owner would pay off CHFA and turn it into market-rate housing,” he said.

The city said it’s willing to extend a 20-year tax abatement deal that will be crucial to making the numbers work.

According to the terms of the prior deal, McCormack Baron and Related Companies would pay $789,000 a year in taxes, rather than the full $1.39 million the city calculated they would otherwise owe (before the latest reassessment). After the deal expired, they asked the city to set taxes at $750,000 a year.

Based on calculations he made with Livable City Initiative Executive Director Serena Neal-Sanjurjo, Nemerson said, the city offered a fixed payment in lieu of taxes similar to the money the company paid before — with a provision stating that, if gross revenues go up, the payment will rise accordingly on a five-year cycle.

New Haven is also willing to forgo most of the debt it’s owed out of the estimated $25 million it racked up in interest and penalties, Nemerson said.

“There is no way to collect that money,” he explained. Because New Haven is fourth in line, other debtors would have to be repaid first. That is, unless the city filed for foreclosure first. But the city doesn’t have at least $60 million in cash that would be necessary to pay out the others.

Nemerson offered a comparison. “If you loan your brother-in-law $1,000 to buy a $10,000 car and your father loans him the other $9,000, and if he then totals the car that’s only worth $5,000, your father gets the money,” Nemerson said. “Unless you buy the wreck and pay your dad.”

Without a real alternative, any payment would be at least “a gesture of fairness.”

Other conditions require that the new owners:

Offer current employees the opportunity to keep their jobs.

Invest in long-overdue upgrades, like modernizing the apartments with new windows, roofs, toilets and insulation.

Turn over management (or even ownership) of the parking garages to the city, which will help spread fixed overhead costs across another 500 spaces.

Sell parcels of land on George Street that are currently surface parking lots back to the city for development.

Board of Alders President Tyisha Walker, who plays a crucial role in approval of any deal, did not return a call for comment.

One group who feels out of the loop are the business-owners, already struggling to stay open as restaurants, clothing stories and yoga studios close up around them. They don’t know how they factor into the company’s plans for the neighborhood.

At a meeting of the merchants association on Wednesday, they agreed to send a letter to the mayor reminding her to watch out for their interests.

“There’s a lot that’s being negotiated with the city and the new owners, and we would like the city advocating on our behalf,” said Helen Kauder, Artspace’s executive director.

Those are very real concerns, Nemerson said. Once a buyer finalizes its relationship with CHFA, he said, the city plans to work closely with the company on a plan to make sure every storefront is “marketed and curated, linked to the streetscape and parking.”

“Whoever the owner is will have to bring in specialists to make sure it stays strong,” he said. “We have great anchors and great restaurants, but we’ve gotta keep working to keep the entire Ninth Square strong.”

Nemerson said the city’s continued investment in the Ninth Square, costly as it might be, is well worth it.

“It has made an enormous impact on New Haven. You could almost say that it was the most impactful thing that’s been done in the city because so much else has played off of it: restaurants, other housing, 360 State St., so many other things,” he argued.

“I think you just have to say this is what governments should be doing. This is how cities get stabilized. This is how you get to have a mixed-income, mixed-use community. This is how you get good housing that’s walkable,” he went on. “If we really want to be dedicated to having mixed-income communities in our cities in high-rise buildings, we’re going to have to find ways to come up with more capital for these projects.”

posted by: Noteworthy on July 13, 2018 4:56pm

1. The city’s economic development office should be renamed: Fxxk Taxpayers Again Department.

2. When this deal was done, City Hall lied to taxpayers.

3. Not one penny should be paid to the current owners at closing.

4. The tax credits should be recaptured.

5. City taxpayers will lose $25,000,000. Under the Fxxk Taxpayers Again Department negotiations, we will also cover the difference in tax payments for the next 20 years between the negotiated amount and what this property should be paying as its fair share of being in New Haven - another $12,000,000 at least.

6. It is a lie that Ninth Square is vibrant. There has been constant turnover in businesses. There is zero stability. That people live there has not translated into any economic benefit. Like the lies about the benefits of Gateway being downtown was supposed to bring economic vitality down the street. Businesses have seen no benefit to having those students there.

7. The Fxxk Taxpayers Again Department should learn to negotiate. All these deals - every single one of them cost taxpayers money - the old clock factory, the 100 College Street, 360 State.

8. It’s typical to keep it all quiet until its done and no taxpayer can do anything about it.

9. Nemerson is in love with 20 year tax abatements - it’s the same line he gave us about the clock factory.

posted by: robn on July 13, 2018 6:24pm

If the city’s in line to take a big haircut; take the haircut and let the private market govern the exchange so the property can be brought fully back into the tax rolls. Enough already NHV; stop sticking it to the unsubsidized taxpayers.

posted by: JCFremont on July 13, 2018 6:41pm

The city and developers keep planing and building these “Neighborhoods” one after another, any new residents will figure the’ll give with the new complex decreasing the value of the old “neighborhood.” Looks to me that by the time the original tax abatement expires and the property goes on the rolls the building has already depreciated both physically and in the value of the neighborhood. Of course when the new landlords get addicted by finding it easier to fill up the units with the lower end of the “mix” we will end up with another South Orange.

posted by: THREEFIFTHS on July 13, 2018 9:37pm

I told all of you back in August of 2017 that this was going to happen to Ninth Square Apartments,But no you all said Stop with the Gentrification Vampire Stuff.

posted by: THREEFIFTHS on August 4, 2017 6:56pm In the words of the actor Laurence Fishburne from the movie Searching for Bobby Fisher.

My bad. Heard from people I know who live in ninth square apartments.They will be the next to be displaced.

Keep on sleeping on these Gentrification Vampires.A lot of you will not be around.

posted by: dad101 on July 14, 2018 6:01am

I ususally dont buy into the three card Monte snake and oil comments but OMG did we not already give BEACON more of a tax break than what we are being pummeled with for tax increase? If Beacon payed taxes comparable to the working man or women in NEW Haven we wouldn’t have had to get smacked with an11% tax increase! This is so absurd we work every day struggle and make sacrifices above and beyond but they are treated like the prodigle son! Big deal they maintained a property they bought . THEY made profits above and beyond what 99% of NEW HAVENS could ever imagine and the elected officials gave them https://www.newhavenindependent.org/index.php/archives/entry/bcj_tax_break/! Now we are going to let them buy another property below cost and give them yet another opportunity to get wealthier off the backs or the working people of NEW Haven and the state of CT. I don’t see tax rebates being given to the person who owns a multiple family and maintains it. I don’t see rebates and credits given to the landlord who doesn’t make a dam dime off their property because they are so busy paying inspection fees, water bills, increased insurances and taxes but these companies that stay in partnership with NEW HAVEN keep making profits and getting our money ...Church street south did it for the past 20 years plus and here is one more partnership that will make millions for no reason other than someone likes them???????

posted by: Noteworthy on July 14, 2018 8:19am

Beacon pays less than 20% of its tax bill at Monterey Place - it got that with the first 20 year deal, then came back for a second bite at the apple. That means taxpayers are annually subsidizing their profits at a rate of more than $400K a year. We will be subsidizing the old clock factory when it’s complete - at a rate of at least $125,000 a year, maybe more. We’re subsidizing 100 College Street - Alexion’s HQ - by hundreds of thousands annually; 360 State - the luxury high rise also known as Taxpayer Towers. It also pays far less in property taxes than it should too. Add Ninth Square - and it’s $40,000,000 subsidy at least between the write off of what taxpayers are owed for their fair share of property taxes.

Beacon should pay its fair share. Or it will never end and homeowners and renters in New Haven will continue to subsidize the fat cat profits, the luxury vacations, homes, caviar and cars of the elites who fly in to “save us” and provide “affordable housing” while making the living costs of the rest of us less affordable.

posted by: wendy1 on July 14, 2018 9:23am

I love this section of town and would happily live there again. There is still much to see and plenty of good food and hangouts. It’s easy walking and close to all the goodies in town, Gateway, museums, State St. and Chapel . For Years it’s had some of the best window dressing in town along Orange and along Crown. I wish the newest landlord and tenants success. I remember watching the place being built and watching pigeons and squirrels live in the beautiful brick loft buildings across the street way before they were renovated. I miss Acme furniture on Crown (bargains for retro). I miss my neighbors. My old landlord, Ernie Delmonico from 15 Orange, is still alive. I dont think you could ruin the ambience there because most of the buildings are small and antique or look antique. Please, no more garages or skyscrapers…...

posted by: the1king on July 16, 2018 9:18am

What does that mean the opportunity to keep their jobs. It is my understanding that they are to keep their jobs at the current rate. This is what was promised by some people in the government. We will see if that happens. Because people that are working there are the ones who are getting screwed. Hopefully Beacon will keep everything the same for them.